Iraqi hotel worker Baha Mousa died in British Army custody after suffering an "appalling episode of serious, gratuitous violence" that represented a “very serious breach of discipline” by UK soldiers, a public inquiry has concluded.

The 26-year-old father-of-two died after sustaining 93 injuries while in the custody of 1st Battalion the Queen's Lancashire Regiment (1QLR) in Basra, southern Iraq, in 2003.

The chairman of the inquiry, Sir William Gage, announced the findings on Thursday. His investigation had also looked into the abuse of nine other Iraqi men held with Mousa.

He said: "The events described in the report represent a very serious and regrettable incident. Such an incident should not have happened and should never happen again."

Gage singled out one soldier, Corporal Donald Payne, who violently assaulted Mousa immediately prior to his death using punches and kicks.

Payne, who Gage called a "violent bully" who meted out a "dreadful catalogue of unjustified and brutal violence", was convicted of war crimes at a court martial in 2006.

The inquiry concluded that Payne's attack was a "contributory cause" in Mousa's death, the Iraqi having already sustained injury through stress positions. His mistreatment also included exhaustion, heat, fear and a lack of food and water.

The Ministry of Defence also came under fire for the "corporate failure" that allowed British soldiers in Iraq to adopt interrogation techniques which included placing prisoners in stress positions, sleep deprivation and hooding. These techniques were banned by the British government in 1972.

Gage also condemned the lack of a "proper MoD doctrine on interrogation", while pointing out that the soldiers involved, including 1QLR's former commanding officer Colonel Jorge Mendonca, also bore a "heavy responsibility".

Speaking of Mendonca, Gage said: "As commanding officer, he ought to have known what was going on in that building long before Baha Mousa died."

The inquiry, which has cost the taxpayer £13 million, also condemned members of the battalion for their lack of "moral courage to report abuse within 1QLR", surmising that the 'conditioning' was so widespread that several officers must have been aware of the violent mistreatment.

"A large number of soldiers, including senior NCOs (non-commissioned officers), assaulted the detainees in a facility in the middle of the 1QLR camp which had no doors, seemingly unconcerned at being caught doing so.

"Several officers must have been aware of at least some of the abuse. A large number of soldiers, including all those who took part in guard duty, also failed to intervene to stop the abuse or report it up the chain of command."

While the inquiry has no powers to accuse the troops of crimes, prosecutors could use its report as the basis for bringing charges.

Labour was in power at the time of Mousa's death and shadow defence secretary Jim Murphy said serious lessons must be learned and those involved should be brought to justice.

"This is a shocking episode from which we must learn serious and lasting lessons. We all feel profound regret at the loss of life of a man in British Army custody. When our Forces have to detain someone they are both in our custody and in our care," he said.

He said the previous government was right to initiate the Inquiry and Murphy said and Labour would support the current government in implementing its recommendations.

But civil rights campaigner Shami Chakrabarti, director of Liberty, said had Labour resisted the creation of an Inquiry in the first place.

“We vividly remember just how strenuously some senior officials, lawyers and former ministers resisted the creation of this Public Inquiry into such appalling human rights abuse," she said.

"They should all search their consciences about how they allowed the five inhuman interrogation practices to be deemed acceptable.

And Eric Metcalfe, JUSTICE’s director of human rights policy, said the Army had failed to learn the lessons of its past.

"The brutal death of an innocent man at the hands of British soldiers is a stain on the very values our armed forces were meant to protect," he said. "The army not only forgot the lessons of its past in Northern Ireland, but its promises too."

General Sir Peter Wall, the head of the British Army, said Mousa’s death at the hands of British soldiers cast a “dark shadow” over the Army’s reputation.

And speaking on Radio 4, General Sir Mike Jackson, who was the head of the Army at the time of the Iraq war, commented: "I firmly believe that the appalling acts which led to the death of Baha Mousa were an isolated case. I do not believe this is representative of the army, indeed the army as a whole was very ashamed of this. There had been provocation but that is no excuse for what happened."

Cage concluded his report calling the actions of the soldiers: "a very great stain on the reputation of the British Army... constituting an appalling episode."

Following publication of the report, Defence Secretary Liam Fox told the House of Commons: “What separates us from our adversaries are our values that guide our actions…when those values are transgressed, it is vital we get to the bottom of why… only in that way can we ensure those values hold firm."

Fox thanked Gage and his team for producing a report that he said was "both balanced and fair." He did, however, say that it made for "difficult reading", highlighting “the violent and cowardly abuse by British servicemen."

"What happened to Baha Mousa was deplorable shocking and shameful," he added.

"The MoD has given a full apology to Mr Mousa’s family… and has paid compensation."

“Incidents like this are rare, but we cannot be satisfied by that. We need to find out who was responsible... what actions have been taken to prevent future recurrence... and ask how the government will respond to recommendations in the report.”